By Julius Peter ,Abuja
The Federal Government and the Central Bank of Nigeria (CBN) have signed a Memorandum of Understanding (MoU) on fiscal and monetary policy coordination aimed at strengthening efforts to tackle inflation, improve debt management, enhance liquidity management and promote stability in the foreign exchange market.
The agreement, signed in Abuja on Friday, establishes a formal framework for closer collaboration between the Federal Ministry of Finance and the apex bank while preserving the operational independence of the CBN.
The pact comes as the CBN advances its transition towards an inflation-targeting framework, with both institutions seeking to ensure that fiscal and monetary policies work in the same direction rather than creating conflicting pressures on the economic.
Under the framework, the two institutions will strengthen cooperation in government cash management, debt issuance planning, liquidity forecasting, macroeconomic analysis, foreign exchange management, data sharing and regular policy consultations.
Speaking at the signing ceremony, CBN Governor, Olayemi Cardoso, said the agreement would provide a structured platform for regular consultation, information exchange and policy coordination between fiscal and monetary authorities.
According to him, the arrangement would strengthen collaboration in critical areas, including government cash management, debt issuance planning, liquidity forecasting, macroeconomic analysis and periodic policy consultations.
Cardoso explained that fiscal and monetary policies were complementary, noting that government decisions on expenditure, taxation and borrowing could significantly affect economic activity, while monetary policy influences liquidity, interest rates and price stability.
He said the timing of the agreement was particularly significant as the CBN continued its transition towards an inflation-targeting framework.
The governor stressed that effective inflation targeting required not only appropriate monetary policy but also a supportive fiscal environment.
He noted that the Federal Ministry of Finance and the CBN had collaborated over the years on issues ranging from inflation management and debt sustainability to budget financing, exchange-rate stability and responses to economic shocks.
However, he said the new agreement would formally institutionalise the relationship and provide a more predictable framework for cooperation.
Also speaking, the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, said the framework was designed to prevent fiscal and monetary policies from working at cross purposes.
Oyedele, however, emphasised that the closer relationship would not compromise the independence of the central bank.
He maintained that the CBN would retain its operational independence in pursuing price and financial-system stability, stressing that coordination should not translate into fiscal dominance.
The minister said the government’s objective was to achieve a sustainable reduction in inflation to single digits, adding that monetary policy alone could not resolve the country’s inflationary pressures.
He said fiscal authorities must complement monetary measures through disciplined and disinflationary spending, sound cash and liquidity management, and efficient government financing that would not unnecessarily crowd out private-sector credit.
Oyedele identified food prices, imported costs, energy and logistics as some of the structural factors contributing to inflation.
He said the government would therefore pursue measures including strengthening grain reserves, improving agricultural yields, expanding irrigation and improving access roads to farms.
The minister also ruled out a return to fuel subsidy, arguing that reinstating the policy could place additional pressure on public finances and the naira.
He said the government and the CBN would improve the sharing of information on government cash positions, financing plans, credit growth and foreign exchange flows.
The agreement is expected to help policymakers better assess the interaction between government borrowing, money-market liquidity, interest rates and private-sector access to credit.
The CBN Deputy Governor, Corporate Services Directorate, Dr Muhammad Abdullahi, said the need for stronger fiscal-monetary coordination had become more important because of global economic uncertainty and geopolitical developments.
He pointed to disruptions in energy and shipping routes as examples of external developments capable of simultaneously affecting oil prices, government revenue, inflation, capital flows and financing conditions.
Abdullahi said the new framework would support regular consultations, information sharing, joint technical analysis, scenario planning and stress testing.
He explained that the two institutions would be better positioned to assess how changes in crude oil prices and production could affect government revenue, foreign exchange inflows, external reserves, inflation, liquidity and financing conditions.
He stressed that uncertainty should encourage policymakers to prepare for different scenarios rather than delay action.
The Permanent Secretary of the Federal Ministry of Finance, Raymond Omachi, said the agreement was aimed at maintaining a balance between inflation control and economic growth.
Omachi said government spending decisions should not inadvertently worsen inflation, while monetary tightening should also be calibrated to avoid unnecessarily constraining economic activity and employment.
He described inflation and growth balance as a core objective of the new framework.
The permanent secretary said the agreement would also help align government borrowing plans with money-market liquidity management, with the objective of reducing the risk of public borrowing crowding out businesses and improving interest-rate outcomes.
He added that the framework would cover exchange-rate and revenue stability, foreign exchange management, resilience to external shocks and regular data exchange between the two institutions.
The new agreement comes against the backdrop of the CBN’s ongoing efforts to move towards an inflation-targeting monetary policy framework.
An International Monetary Fund assessment published in May 2026 said the CBN had begun exploring the appropriate dimensions of a long-run inflation target and was working on reforms to its monetary policy framework. The IMF also highlighted the importance of a credible foreign-exchange intervention framework and stronger fiscal management as part of the broader economic reform process.
The IMF has also previously noted that Nigeria’s fiscal and monetary policies need to work together to strengthen macroeconomic stability, while recommending measures to improve the effectiveness of monetary policy and foreign-exchange management.
The latest FG-CBN agreement therefore represents an attempt to create a more structured institutional mechanism through which decisions on government financing, liquidity, inflation and foreign exchange can be considered together.
For businesses and households, the effectiveness of the framework will ultimately depend on how successfully coordinated policies translate into lower and more stable inflation, improved access to credit, greater foreign-exchange stability and a more predictable macroeconomic environment.
